The first quarter of 2024-25 has closed with an unusual and extremely positive outcome. There is actually a budgetary surplus of Rs1,537 billion. This is attributable to the receipt of Rs2,500 billion as the profits of the SBP (State Bank of Pakistan). However, there will be no further transfer in 2024-25 by the SBP.

There is a need to exclude this transfer if a comparison is to be made with the performance in the first quarter of 2023-24. The result is that the federal budget deficit, excluding the once-and-for-all SBP transfer, is Rs963 billion. This is still better than the deficit in the first quarter of 2023-24 of Rs1,031 billion, when there was no transfer of profits by the SBP. As such, the performance of the federal Ministry of Finance must be commended.

What factors have contributed to the better performance? First, FBR revenues have shown a moderately high growth rate of 25.5%, although the targeted annual growth rate is close to 39%.

Second, for inexplicable reasons, the expenditure on debt servicing has come down by 5.3%, whereas the expectation is that in the whole of 2024-25 it will increase by almost 20%. This alone has contribution to the reduction in federal current expenditure by almost Rs350 billion.

Third, federal development expenditure has also been severely cutback in the first quarter. Only Rs38 billion has been incurred on projects. This is not even 3% of the annual budgeted outlay of Rs 1,400 billion. Overall, it is likely that the federal budget deficit will be substantially higher in subsequent quarters, especially since there will be no further receipt of SBP profits.

Turning to the provincial governments, their combined budgetary performance has been better than in the corresponding........

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